Competition and Road Transport Sector

Competition and Road Transport Sector *
Dhanendra Kumar
Chairman, Competition Commission of India,
Former Executive Director, The World Bank
and
Former Secretary, Ministry of Road Transport & Highways, Government of India.
Prologue
The Author, who has spent a long time
with the Indian Administrative Service, has
acquired extensive experience in
infrastructure, investment and industrial
development. Having worked as
Secretary, Road Transport & Highways,
Executive Director at the World Bank and
now as Chairman of the Competition
Commission, he has a unique insight in
this important aspect of the transportation
sector.
In this Article, competition issues in the
road transport sector have been lucidly
brought out.
The competition issues in road
construction projects, need for a regulator
and the road map to introduce competition
in the road sector have been highlighted.
The beneficial impact of competition in the
sector on consumers has been brought
out.
In view of the importance of an effective
road transportation system for successful
implementation of the country’s socio-economic
policies, the Paper is most
informative and relevant.
- Editor
Transport is considered the economic lifeline of a country. While at the
macroeconomic level, mobility that it confers is linked to a level of output, employment
and income within a national economy, at the microeconomic level it is linked to
producer, consumer and production costs.1 An efficient Road Transport Sector, in
particular, plays a crucial role in a country’s economic progress and growth. Bringing
together both supply and demand sides, road transport sector influences the entire
gamut of social and economic activities of a country.
Road Transport Sector and its importance
Often only direct effects of road transport generated by the transportation of
goods and people are considered, ignoring its positive multiplier effects on industry,
*The views expressed in this article are personal and may not necessarily reflect the
position of CCI.
1. Rodrigue, Jean-Paul : Transportation and Economic Development
http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/ch7clen.html.
RITES Journal 8.1 July 2010

8.2 Competition and Road Transport Sector
commerce, small trade and the service sector. These spin-offs including better access
to market places and enhanced investments are limited not only to urban centres. A
study conducted by US Agency for International Development in 1982 outlines significant
social-economic benefits out of a well developed road network even in rural areas in
terms of increased employment opportunities due to use of labour-based methods in
road construction projects, access to education, health and nutritional facilities,
strengthening of local market towns as economic centres, movement of farm inputs,
collection of the harvested crops, crop marketing etc.
International Experiences -
Autobahns of Germany and Interstate System of US
Experience from other countries suggests that an efficient road transport
system can greatly contribute towards the growth of a nation’s economy. The Autobahns
in Germany show how road networks can help country’s economy as a whole. Providing
jobs during its constructions and economic benefits after its completion, Germany’s
autobahn, having a network of about 12,200 km today, unites the remotest corners of
the country, while connecting major cities with one another. It is estimated that 5.8
million people working in road transport now generate a per capita gross value of
about •66,000 in Germany. The total gross value creation in road transport is about
•381.6 billion which accounts for about 18 percent of the overall gross value creation.2
The autobahns of Germany have been followed in other countries of Europe also like
Switzerland and Austria.
Authorized by the Federal-Aid Highway Act of 1956, popularly known as the
National Interstate and Defense Highways Act of 1956, U.S. Interstate System created
by Dwight D. Eisenhower is another example of how roads can build nations. One of
the most efficient road systems in the world, currently, it is about 46,000 miles long
and connects coasts, borders, cities and small towns leading to vast proliferation of
businesses in USA. 3
Road Transport Sector – Present Status in India
A robust economy growing at a rate of about 8% has created a huge demand
and pressure on the road transport infrastructure in India. In many developed countries,
transportation accounts between 6% and 12% of GDP. In India, the sector accounts
for about 6.4% of GDP.4 As may be seen from the Table 1, road transport has emerged
as the dominant segment in India’s transportation sector with a share of 4.8% in
2. The Benefits of Road Transport, October 2008, ADAC, http://www1.adac.de/images/
Benefits%20Road%20Transport-Fachinfo_081201_tcm8-238409.pdf
3. Mc Nichol, Dan : The Road That Built America, The Incredible Story of the U.S. Interstate
System.
4. Ministry of Road Transport and Highways, Transport Research Wing.

Dhanendra Kumar 8.3
India’s GDP in comparison to railways that has a 1% share of GDP in 2008-09. The
increase in percentage share of transport in GDP since 1999-2000 has come from
road transport sector, with share of other modes remaining nearly constant with a
marginal increase in the share of railways.5
Table 1: Share of Transport in India’s GDP
Sector 1999-2000 2004-05 2005-06 2006-07 2007-08 2008-09
Transport of 5.9 6.8 6.7 6.7 6.7 6.6
which:
Railways 1.3 1.0 1.0 1.0 1.0 1.0
Road Transport 3.8 4.9 4.8 4.8 4.8 4.8
Water Transport 0.2 0.2 0.2 0.2 0.2 0.2
Air Transport 0.2 0.2 0.2 0.2 0.2 0.2
Services * 0.4 0.5 0.5 0.5 0.5 0.4
Source: Central Statistical Organisation
* Services incidental to transport. Since 2004-05, values are at 2004-05 prices. All shares
in GDP are inclusive of Financial Intermediation Services indirectly Measured (F.I.S.M.).
Expanding Road Network
Road Transport in India having about 3.6 million kilometres of road network
now is arguably the second largest in the world6 . Currently, the length of various
categories of roads is estimated to be as under:
Table 2: Length of Roads in India
National Highways 70,934 Km
State Highways 1,33,000 Km
Major District Road and other 34,17,000 Km
District Roads
Share of road traffic in total traffic has grown from about 14/% of freight traffic
and 15% of passenger traffic in 1950-51 to an estimated 60% of freight traffic and 87%
5. Singru, Narendra : Profile of the Indian Transport Sector: Sector Assistance Program
Evaluation for the Transport Sector in India - Focusing on Results, Asian Development
Bank, August 2007.
6. Basic Road Statistics of India 2001-02, 2002-03 and 2003-04 published by Transport
Research Wing, Ministry of Road Transport and Highways. As per latest figures from
Ministry of Road Transport and Highways.

of passenger traffic by the end of 2005-06.7 Although National Highways constitute
only about 2 per cent of the road network, it carries 40 per cent of the total road traffic.
Focus on Highways in recent years
Historically, investments in the infrastructure sector, particularly in the
highways, have been made by the Government. Roads were earlier cited as “Public
Goods” but that perception has changed over the years.8 The increasing resource
requirements and the concern for managerial efficiency are some of the factors that
have given a policy shift to an increasingly active involvement of the private sector in
India and one of the significant steps taken in this direction was amendment in 1995
in National Highway Act, 1956 to encourage private sector participation in the
development, maintenance and operation of national highways.
In order to take up the improvement and development of National Highways,
National Highways Development Project (NHDP), has been initiated on a large scale.
Spread over seven phases with an estimated project construction cost of Rs. 337,959
crore upto 2017, the project has been undertaken in the country under the National
Highway Authority of India (NHAI).9 Besides NHDP, Special Accelerated Road
Development Programme for North Eastern Areas (SARDP-NE) and a Special
Programme for Development of Roads in Left Wing Extremism (LWE) have also been
initiated.
There is a massive and ambitious road development programme to build
7,000 km of highways annually for the next five years at a rate of 20 km per day. In
addition, ten planned “mega projects”, at around US$1bn each, have been announced
which have the potential to attract big private players including foreign players.10
To meet these objectives, the government has in recent times further put in
place a number of institutional and regulatory mechanisms including a set of fiscal
and financial incentives to encourage private sector participation in road sector. While
road construction projects were earlier funded by multilateral development agencies,
the preferred model for development now is that of public-private partnership. The
common forms of PPP for development of National Highways in vogue are Build,
Operate and Transfer (Toll) Model; Build, Operate and Transfer (Annuity) Model and
Design, Build, Finance and Operate (DBFO) Model. In the BOT (Toll) model, the
concessionaire receives its income from toll revenues (toll fees prescribed by NHAI),
7. Annual Report 2008-09, Ministry of Road Transport and Highways.
8. Roth, Gabriel (Ed. ) : Competition, Entrepreneurship, and the Future of Roads. The
author has discussed how thousands of miles of roads were covered under privatization
in 18th and 19th centuries.
9. Details as obtained from Ministry of Road and Transport Highways.
10. As reported in the Ministry of Shipping, Road Transport and Highways, press release,
“ Mega Highway Projects’ , 1 December 2009.

Dhanendra Kumar 8.5
and save for any grant it receives from the awarding authority, takes the risk that
these revenues will be sufficient to repay any debt financing to fund project costs and
provide a return to shareholders. By contrast, in BOT (Annuity) model, the
concessionaire’s revenue is earned via sums payable by the awarding authority semi-annually.
The level of annuity payment bid by the concessionaire is intended to be
sufficient to cover project and finance costs and provide a reasonable return to
shareholders. As the concessionaire does not bear the traffic or tolling risk in this
model, it is generally considered to be less risky for investors. It has been thought
that lower perceived risk levels will be attractive to many private sector players, which
in turn will promote competition.
Initially NHAI found it hard to evince sufficient private sector participation in
its road projects, as witnessed in some tendered projects where there have been no,
or only sole, bidder competing for a project. In August 2009, the Prime Minister
constituted a committee chaired by Shri B. K. Chaturvedi of the Planning Commission
(known as the “Chaturvedi Committee”) to review and consider any procedural and
financial impediments to NHDP with a view to accelerating the pace of the programme.
Following an extensive consultation with various stakeholders, Chaturvedi Committee
came out with sets of recommendations for the selection of projects by NHAI and
also suggested a host of amendments to model concession agreement for national
highways.
The recommendations of the Chaturvedi Committee were adopted by the
Government and subsequent Requests for Qualification (RFQ) and Requests for
Proposal (RFP) have followed the recommended amendments to the bidding process
and model concession agreements. In order to give a boost to NHDP and to prevent
projects being held up in multiple tendering processes, Chaturvedi Committee
recommended that the earlier waterfall approach be replaced with a more streamlined
approach to the selection of the appropriate model for implementation. The Chaturvedi
Committee also suggested certain amendments to the bidding process which were
accepted by the Ministry of Road Transport and Highways (MoRTH).11 Major concerns
relating to RFQ, RFP and MCA affecting bid response have been sought to be removed
through implementation of these recommendations.
A change has recently been announced by NHAI restricting a bidder from
being able to bid for more projects, while it currently has three or more letters of award
of contract outstanding. This change has been introduced to prevent bidders
overstretching themselves even when they do have adequate resources to complete
the projects. Although this should generate competition in the long run, however, if
11. Chaturvedi Committee’s report suggests significant changes in areas of bid-security,
conflict of interest, pre-qualification, early termination, model concession agreement,
divestment of equity, security amount to increase the potential pool of bidders for each
project etc.

projects are not efficiently processed, apprehensions have been raised, that this
change may also lead to a reduced pool of available bidders in future. 12
Despite several policy initiatives, however, the sector remains inefficient. The
reason for inefficiencies eventually may be linked to improper and ineffective regulation
in the sector and policies that inhibit competition.13
Role of Competition Commission
Competition Commission of India (CCI) established by the Competition Act,
2002 is mandated to prohibit anti-competitive agreements that cause or are likely to
cause appreciable adverse effects on competition in markets within India, prohibit
abuse of dominance by enterprises and regulate combination where the total value of
assets or turnover of the parties to a combination does not exceed the limits prescribed
in the Act.
The Commission is also mandated to create awareness and impart training
on competition issues through advocacy, and render opinion on competition issues
on a reference or otherwise as prescribed in the law.
Competition Issues in Road Transport Sector
At a time, when there is emphasis on need of well connected road networks,
provision of effective and efficient goods and passenger transport services, it is
imperative that various issues concerning competition both in road construction sector
and goods and passenger road traffic sector are examined.
Competition issues in Road Construction Projects
Design of Tender Documents and Transparent Bidding Procedure
Tender design is a skilful task and should be done in such a manner that it
encourages a transparent evaluation. Prequalification process having composite scoring
containing both technical and financial values with technical scores having high
subjectivity, may have bearing on competition and therefore requires careful
consideration.
If the technical specifications are too stringent, then competition is reduced
typically. Behaviour of bid rigging and collusive bidding is seen in the road construction
12. www.ashurt.com/doc.aspx?id_constant=505.The study also gives details of the
recommendations of Chaturvedi Committee and its further implementation, part of
which has been discussed here as well.
13. Mehta, Pradeep S : “Towards a functional Competition Policy for India: An overview”;
CUTS International.

Dhanendra Kumar 8.7
industry as it is highly concentrated and players compete with each other repeatedly.
Some of the symptoms of existence of anti-competitive behaviour can be noticed
when similar rates are quoted by everybody participating in the tender, e.g., if for a
particular stretch 5% above estimates are allowed, all participants increase rates by
say, 4.99 or 4.79% together.
The agencies involved in the award of contracts for road construction projects
must ensure that a system of transparent bidding procedure is in place. It may among
other things involve a well developed, fair and transparent pre-qualification system, a
well-defined system of invitation of bids, and uniformity of policies and standards. It
has been the experience in some cases that even though two-three players bid for a
project, but more often, the one who is awarded the contract, eventually sub-contracts
the work to the other remaining players, its so-called competitors. Therefore, bids
should not be structured in a manner which allows only a few large players to bid and
corner the projects.
Korea has evolved a unique electronic based procurement process. The
platform undertakes easy monitoring of certain patterns of conduct like, bids much
higher than the published price, fewer than normal competitors submitting bids,
inexplicably huge margin between winning bidder and another bid, regular recurrence
of low bids, etc., which may be indicative of collusive bidding or bid rigging. Government
may consider evolving such a system for all procurement systems including award of
contracts in road construction projects.
As per Section 3 (3) (d) of the Competition Act,2002, any agreement which
directly or indirectly results in bid rigging or collusive bidding, shall be presumed to
have an appreciable adverse effect on competition. The CCI is mandated not only to
prohibit such anti-competitive agreements but also penalise the players involved in
these kinds of activities. The authorities concerned must ensure that tendency of
high bid prices, collusive bidding, is kept under check and any such practices reported
to CCI for conducting appropriate inquiries for remedial action.
Ease of Entry Barriers
Another point which has a significant bearing on competition is the mandatory
requirement for registration of contractors at the state level. There have been instances
when this kind of requirement has led to creation of entry barriers leading to territorial
allocation among different contractors, ultimately leading to the monopoly at the
implementation level and this needs to be corrected.
National Highway Fee (Determination of Rates &Collection) Rules, 2008
enables Government to collect fee for usage of any section of national highway,
permanent bridges etc. In most of the toll highways, since no alternative route has
been provided, the user is forced to use the highways. This fee is in addition to cess
being charged on petrol meant for development of roads and the taxes being paid.

This may give rise to a situation of abuse of dominance creating high cost services
and proper regulation to check that may be required.
Road Construction materials
Due to massive construction activity, there is a high demand of construction
materials like Aggregates, Cement, Bitumen, Steel etc. Continued supply on
competitive rates of these construction materials needs to be ensured and the process
of provision of vital inputs for construction of roads must be monitored closely to
ensure that anti-competitive agreements and cartelisation, like that noticed in some
European Countries, do not lead to higher project costs.14 Sometimes there may be
projection for necessity of use of certain items designating them as proprietary in
nature, a practice which needs careful evaluation since it may inhibit competition.
Outsourcing of maintenance work
At present, the maintenance of roads is largely in the hands of the Government.
Outsourcing road maintenance to the private sector has been found to be instrumental
in massive reduction in road maintenance costs. Substantial savings ranging from
20% to 50% on this account have been noticed in Brazil and Columbia. Government
may not only contemplate outsourcing such activities, but also think of generating
enough competition to keep it away from the clutches of a few big players; otherwise
there could be denial of expected benefits.
Performance Based Contracts
The traditional way of contracting out road maintenance is based on the
amount of work being measured and paid for on agreed rates for different work items,
giving the contractor little incentives for efficiency. By contrast, Performance-based
Road Management and Maintenance Contracts (PBC) founded on how well the
contractor manages to comply with the performance standards defined in the contract
and not on the amount of works and services executed may increase efficiency in
executing road maintenance. Although this allocates higher risk to the contractor
compared to the traditional contract arrangements, it also opens up opportunities to
increase his margins, since improved efficiencies and effectiveness of design, process,
technology or management are able to reduce the cost of achieving the specified
performance standards. The introduction of Performance Contracts in road
maintenance has resulted in considerable cost reductions in Australia, the United
States and New Zealand. This may also help in inducing desirable competition in the
sector and may be considered in India as well.
14. European Competition Commission imposed fines on 14 companies totalling of
• 266.717 million for price fixing of road bitumen in the Netherlands.

Dhanendra Kumar 8.9
Capacity Building
There is also an urgent need for capacity building of contractors, consultants,
concessionaires, qualified engineers, technicians for the massive Highway Development
Programmes under way. In the absence of adequate number of Engineers/Technicians,
Concessionaires/Contractors and Consultants, there is no level playing field and the
competition is restricted among the few existing bodies/organisations.
Need for a Regulator
Apart from addressing issues mentioned in preceding paras, Government
may also consider appointing a regulator in road sector who will look into not only
financial claims by the concessionaire but also issues involved in fixing toll rates with
increase/decrease in toll collection because of competing facilities and modes of
transport. Apart from regulating fixation of tolls and claims, control over anti-competitive
behaviour would also be a regulatory institution15 to prevent the acquisition and
exploitation of excessive market power. The CCI is prepared to take up this task both
through enforcement and by way of measures of advocacy.
Competition Issues in Passenger Road Transport
Developments in the Sector
As has been brought out, the passenger road traffic sector has witnessed an
exponential growth in recent years; generated partly by public sector and largely by
private sector comprising about 28 % and 72 % respectively of the total buses. The
participation of the state in road transport commenced in 1950 and since then State
Road Transport Undertakings (SRTUs) have been formed in every state. The
performance of SRTUs, however, has been quite dismal over the years. The net
aggregate loss incurred by 35 SRTUs has increased by 58.4 % from Rs. (-) 1981
crore in 2007-08 to Rs.(-) 3137 crore in 2008-09.16 The reasons for the underlying
inefficiencies may be explained in lack of enough competition and ineffective regulation
in the passenger road transport sector.
Ways to Introduce Competition in the Sector
Many ways of introducing fair competition in service provision to the inter-city
passenger transport markets have been suggested. Route franchising, a means of
15. Henry, E. and Pacheco, R.S. : “Relations De Pouvoirs Entre Entreprises D’autobus Et
Tutelle: Refléxions à partir du cas du Brésil” in X. Godard (ed). Les transports dans les
villes du Sud. Paris: Karthala. Quoted in World Bank, Sustainable Transport, 1995.
16. Review of the performance of State Road Transport Undertakings(SRTUs), Ministry of
Road Transport and Highways (Transport Research Wing), March 2009.

maintaining some public control over the level of services and prices in the public
passenger transport market, while using competitive forces to secure supply at the
lowest cost have been taken as one of the ways to introduce competition as in UK,
Costa Rica and New Zealand. Where fragmented competition is not possible because
of the indivisible scale of operation, market disciplines can still be employed by
competitive concessioning facilities or systems. This has been applied to the
management of urban bus systems, particularly in francophone Africa. 17
A study18 of state of competition in seven states-Rajasthan, Orissa, Kerala,
Tamil Nadu, West Bengal, Himachal Pradesh and Maharashtra conducted by National
Council of Applied Economic Research (NCAER) commissioned by Competition
Commission of India, on the basis of the performance of three important indices,
namely, Competitive index, Efficiency index and Consumer Satisfaction index, has
noted that the degree of competition in passenger road transport varies from state to
state. After doing analysis of alternate models in the Passenger Road Transport
(PRT) sector; the study has recommended the following to improve the competitiveness
of bus passenger transportation:
i) Public sector monopoly may be put to an end to let competition prevail
on each of the routes.
ii) Registration time should be reduced since it has been found to be the
one of the barriers to competition in the public transport sector.
iii) There is a need for reduction of permit charges since such charges for
more than one region are considered as barriers to free entry.
iv) Asymmetry of information must be corrected since without perfect
information, competitive environment cannot prevail.
Taking the bus routes in two parts: commercial and non-commercial routes,
(the former being profitable routes while the latter non-profitable) and keeping in view
the social requirements too, the study has proposed competitive tendering on
commercial and competitive bidding on non-commercial routes, which essentially
may have two broad alternatives; Universal Service Obligation (USO) and Operational
Viability Gap Fund (OVBF). While in the case of former, competitive tendering may
remain the criteria for choosing franchise in a given area, in case of OVBF, the lowest
subsidy bidder may be awarded the contract.
Experience of Competitive tendering in some countries
London Transport began competitive tendering bus services in 1986 and nearly
all services were competitively tendered by the end of fiscal year 1998-99. The following
17. Road Transport Efficiency Study, India,World Bank, 2005, http://
siteresources.worldbank.org/INTSARREGTOPTRANSPORT/PublicationsandReports/
20747263/Final_version03NOV2005.pdf.
18. Report on State Policies Affecting Competition: Passenger Road Transport Sector :
Competition Commission of India , 2007.

Dhanendra Kumar 8.11
chart summarises cost performance from 1985, which entails the advantage of
competitive tendering.
Table 3 : Cost performance of London Transport19
Efficiency Parameters 1985-99
Service Kilometer +28.5%
Annual Costs -26.0%
Cost per Kilometer -42.4%
Positive outcome of competitive process has also been realised in countries
like United States, Chile, France and Finland and needs to be followed in India as
well.
In an unregulated market, profit may be sought through the creation of an
operators cartel, as occurred in the bus industry in Santiago, or by operators combining
with suppliers of terminals or other infrastructure to exclude competitors from access
to crucial facilities. Co-operation among the bus companies on pricing and market
sharing within the so-called general tariff agreement has been observed which violates
the laws on competition.20 The competitive tendering suggested above would ensure
that 3A’s- availability, affordability and accessibility are efficiently catered to by the
road transport sector.
Impact of Competition on Consumers
It has been observed that increase in number of market players enhances
competition with a positive impact in terms of reduction in prices for the consumers
Fig.1 : Average Fare/Km
Average fare per Kilometre on various sectors selected for January 2010. Source: MoCA.
19. Report on State Policies Affecting Competition: Passenger Road Transport Sector :
Competition Commission of India , 2007
20. OECD Paper on Finland, 1998.
(Figs. in Rs./Km)

as observed in case of airlines industry in India. Delhi-Dehradun sector, where the
number of operators is less has clocked the highest fare per Kilometer, as against
Delhi-Bangalore having comparatively more numbers, clocking the lowest.
Since a positive co-relation in the number of players in the market with that of
reduction in fares has been noticed as above, it is necessary to remove all entry
barriers and enhance participation through a process of competition.
Competition issues in Goods Transport Industry in India
Evaluation of Role of Intermediaries
To study the competition issues in the Goods Transport industry, CCI had
commissioned a study in the past which was conducted by the Department of
Economics, University of Mumbai.21 The structure of trucking industry in India has
been as one consisting of truck operators, intermediaries and users. It has been
noted that majority of truck goods transporters are small operators and as a general
practice, they do not come into direct business contact with the users. Only in about
2-3 percent of cases customers directly access the truck owners and book their
goods. After studying different supply chain models, the study has noted that the
market appears to be segmented on various basis, say as per area of operations and
as per routes, i.e. operators as well as booking and commission agents seem to have
certain preferred routes. It has also been observed that this kind of market segmentation
seems to have led to more powers in the hands of intermediaries as the information
flow is normally accessible to them only.
The intermediaries include broking agents (also called transport suppliers or
transport contractors) and brokers. These players basically perform the role of
middlemen for truck owners. In the past, the intermediaries, have enjoyed higher
margins and have been in such a position so as to exploit the market situation in their
favour since they alone have the financial resources and market information necessary
to influence the prices. Agents/transport contractors are at present an unregulated
lot, even though they act as powerful agents. Section 93 of Motor Vehicle Act provides
for licencing, inter-alia, of any agent or canvasser engaged in the business of collecting,
forwarding or distributing goods by trucks. Since the wordings of the section are not
clear and brokers and booking agents are not distinctly covered, there is a need to
cover their activities under regulation in order to avoid any possible anti-competitive
agreements among them.
Collective behaviour of operators
There have also been instances of cartelised operations of truckers’ union
around the production sites and factories. The process of cartelization in the local
21. Report on Competition issues in the Road Goods Transport Industry in India with
special reference to the Mumbai Metropolitan Region, Competition Commission of
India, 2007.

movements and bid rigging practices in the context of attempts to aim at competition
for the market by way of tenders and open bid procedures, need to be looked into and
such practices removed/curbed. A system of syndicate may emerge among the
truckers if the activities are not regulated as observed in Nepal.22 Mexico’s Federal
Competition Commission has recently fined five trucking companies upwards of
US$ 2 million for allegedly colluding to raise prices to their customers to make up for
increases in fuel costs. In case of Sirmur Truck Operators the truck operators were
found acting in concert while fixing freight rates for rendering transport services and
not allowing non-member truckers to operate. The MRTP Commission finding such
practices as restrictive had to issue cease and desist orders.
Need for Competitive Rates
The CCI, as mandated, shall investigate all cases of action in concert in
order to ensure maintenance of competitive rates. As a measure to curb the practices
of price fixation in local movements, Regional Transport Authority (RTA) may provide
parking spaces where operators could be located and also notify (based upon
discussions with the operators and users) a price band within which the operators
could compete until such time that the market has effective competition, as has been
concluded in the study conducted by University of Mumbai mentioned above.
Corrections in Existing Regulations
Certain corrective actions in existing regulatory environment are also required.
For example, anomalies resulting from Customs’ bonding requirements in the context
of container movements from the ports need corrections to provide a level playing field
to the trucking sector and increase its efficacy. Further, continuation of the relevant
provisions relating to fixation of minimum and maximum rates in Section 67(1) and
79(2)(iv) of Motor Vehicles Act is also be required to be looked into to ensure that
there is no demand for minimum rates under the existing regulatory framework.
Easy Availability of Finance to facilitate entry
At present funds are available to small road transport operators under the
priority sector lending scheme of Banks. Small operators have to depend on private
finance with high rate of interest which increases their capital cost, while big and rich
transport operators are in a position to meet the finance requirements. Easing out
high cost of financing may further facilitate entry of small operators and encourage
competition.23
Ease of Movements to Promote Efficiency
It has been realised 24 that smooth and seamless flow of freight movement by
road across States/UTs must be facilitated so as to foster single barrier free domestic
22. In Nepal truckers are organized under syndicates under which non members are not
allowed to play. (Anti-Competitive Practices in Nepal, Adhikari and Regmi,CUTS and
SAWTEE, 2001.
23. Shazia, Malik : “Phenomenal Growth: Skewed Structure”, The Asian Journal, Volume
7,Number 2, June 2000.

market. Adaptability and application of information technology and Intelligent Transport
Systems (ITS) to all aspects of trucking operations would help achieving this and also
in ushering competition, since through these measures information asymmetry, which
impacts profitable operations, can be minimized.
While the industry delivers low freight rates, service quality is poor; with
transit times nearly double that of developed countries. Normal distance travelled by
trucks in India is 250-300 Km per day where as the international norm is 600-800 km
per day. Reasons for vehicle detention may be a variety of regulatory requirements
like inter or intra-state permits, road tax, load checks, local police check posts, sales
tax, octroi, entry permits, various paper requirements and also inefficient and corrupt
enforcement. Table 4 below gives details of total en-route expenditure incurred for the
three routes – Mumbai-Delhi, Kolkata-Delhi and Kolkata-Chennai and its percentage
distribution under different heads. A further break-up of official and unofficial expenses
towards official agencies and octroi, etc. are also shown in terms of percentages.
Table 4: En-Route Expenses Incurred25
Mumbai-Delhi Calcutta-Delhi Calcutta-Chennai
Total en-route Expenditure Rs. 8100 Rs. 6550 Rs. 7500
Distribution of Exp.(% of total)
1. Diesel & Oil 51.85 64.12 65.83
2. Crew Expenses 7.41 7.63 9.33
3. RTO & Police 29.88 6.71 9.08
Official (24.8) Nil (54.4)
Unofficial (75.2) (100.0) (45.6)
4. Octroi & other taxes
Check-post Exp. 1.05 3.66 3.34
Official (29.4) (12.5) (Nil)
Unofficial (70.6) (87.5) (100.0)
5. Toll fees 0.80 0.31 1.27
6. Broker’s Commission 5.56 5.35 2.00
7. Loading/Unloading 2.22 12.22 3.79
Official (83.3) (100.0) (71.4)
Unofficial (16.7) (Nil) (28.6)
8. Others (Weighing, minor
repairs,tyre puncture,etc.)
Official (30.0) - (89.6)
Unofficial (70.0) - (10.4)
Truck delays at checkpoints have been estimated to cost the economy
anywhere between Rs.9 billion and Rs.23 billion a year. The estimate does not include
“Facilitation Payments” made at the checkpoints and these have been estimated to
24. National Road Transport Policy, Ministry of Road Transport and Highways
25. Debroy, Bibek and Kaushik, P.D. : “ A Background Paper on Barriers to Inter-State
Trade and Commerce –The Case of Road Transport”, Rajiv Gandhi Institute for
Contemporary Studies.

range between Rs.9 and Rs.72 billion.26 According to a Study of the World Bank,
costs of various inefficiencies in the trucking sector shows that between Rs. 17 and
46 billion of economic costs could be saved per year, if the inefficiencies in the current
system are addressed.
It has been observed, that the system of the inter-state check posts poses
hindrance to timely movement of goods and needs improvement for speedy clearance
and movement of vehicles at entry and exit points. This is expected not only to lead
to faster turn-around time but also help in improving road economics.27 In this direction,
green channel concept like the one introduced in Gujarat and adoption of Single
Window clearance for all authorised charges may improve freight movement at a
desired level if associated with automation and computerisation of Inter State Check
Posts (ICPs). Electronic surveillance and computerisation present vast opportunities
for outsourcing with consequential benefits arising out of competition.
Coupled with the above measures, state level rationalization of motor vehicle
taxation, uniformity in RTO rules will avoid irrational pricing and lead to enhanced
efficiency of services.
A survey by UN-ESCAP has highlighted the pervasive effect of delays in the
free flow of goods from India across international borders, namely Nepal and
Bangladesh. Usually, the cost burden at the border is estimated as US$ 1.5 – 10 per
ton, which is considerably higher than in most developed economies. The North-East
sector is supposed to be the worst sector for transporting agencies because of various
reasons, namely, difficult driving conditions and poor legal enforcement measures.
Table 5: Transport and Transit: Performance Indicators28
Time Delays (in days) Costs (US $/ton)
Transit Border Transfer Transit Border Transfer
time crossing time costs crossing
Calcutta-Petrapole- 1.5-2 0.5-2 1-2 64 2-3 7-8
Benapole-Dhaka (Road)
Kathmandu-Biratnagar 5-7 1.5-2 1-2 10-40 1.5-3 7-8
-Calcutta (Road)
Kathmandu-Birganj- 5-7 3-7 NA 20-40 7.5-10 7-8
Calcutta-Haldia (Multimode)
Patna-Hill-J.Bridge- 10-15 1-3 0.5-2 8-10 5-10 7-8
Dhaka-Chittagong (Road)
Guwahati-Shillong-Dawki- 6-10 0.5-2 0.5-2 NA NA NA
Tamabil-Chittagong (Road)
26. Road Transport Efficiency Study, India,World Bank, 2005.
Website : http://siteresources.worldbank.org/INTSARREGTOPTRANSPORT/
PublicationsandReports/20747263/Final_version03NOV2005.pdf.
27. Report of the Working Group on Competition Policy, Planning Comm., February 2007.
28. A Background Paper on Barriers to Inter-State Trade and Commerce –The Case of
Road Transport , by Dr. Bibek Debroy and Dr. P.D. Kaushik of Rajiv Gandhi Institute for
Contemporary Studies.

To reduce delays at border crossings, particularly for high value or time-sensitive
goods, the report of World Bank on Efficiencies in Transport Sector in India
recommends consideration of a system such as the European T.I.R., to permit sealed
trucks which elect to use the system to operate without en-route inspections on the
basis of a certificate issued at origin by a duly authorized and bonded issuing entity.
A sound ease free freight system will require a host of wayside amenities like
maintenance and repair facilities, parking space along highways, terminals for
commencement of next assignment. The government may look into this to avoid
congestion and ease of flow. This will open windows of opportunities for private
participation and realisation of fruits of privatisation through a process of competitive
bidding.
The road transport sector at present is heavily regulated and progressive
economic de-regulation in this area is required. It has been assessed that the road
freight sector can sustain a high level of competition and liberalisation of this sector
has the potential to produce substantial gains through price reductions, service
improvements and enhancements in efficiency.29 Thus, effective steps are required to
be taken to generate enough and effective competition in the sector.
Inter-Modal Competition Issues
In order to cater to the emerging requirements of economy, elimination of
regulatory and physical barriers in all sectors of transport is necessary which can
pave the way for a seamless national (single) market.30 There is a case for last mile
connectivity both in freight and passenger road sector. In the latter while it may mean
a single ticket system which will connect remotest villages to railways and airports,
in the former it may mean integration of places of production to all centres of despatch
and market places. Compartmentalized approach to decision making towards India’s
transport policies needs change and what needs to be emphasised is development of
a multi-modal freight transport system which can lead to improved productivity through
eliminations of the bottlenecks. There is a case for promoting multi-modal transport
to optimize investments and improve overall distributive and transport efficiency.31
Although the advantages of inter-modal operations are obvious, they may
also have anti-competitive effects. For example, a shipping company may charge its
customers less if they make use of a certain allied company in the port for the
unloading and then another allied/specified one for transporting it via road. This in
itself is not a collusive agreement, but may have an adverse effect on the rest of the
competitors, which could result in, amongst other things, foreclosure. There may
29. Competition issues in Road Transport 2000, OECD Policy Roundtables.
30. Studies have been conducted in this area by Dr. Sriraman, The Role of Transportation
and Logistics in India: Emerging Issues and Prospects
31. CII(2000), “A case for substitution of Octroi, Confederation of Indian Industry”.

also be a tendency to abuse its position of dominance, in case one company gets
control over say, shipping lines, ports and road transport together. Further, combination
between different players operating different modes of transport for example, a shipping
company and a road transport company would also have to be monitored in order to
eliminate any anti-competitive effect arising out of such combinations.
Conclusion
Robust growth in road transport in recent years has been attained despite
significant barriers in inter-state freight and passenger movement compared to inland
waterways, railways and air which do not face much enroute checks/barriers. Global
competition has made the existence of efficient transport an absolute imperative
requiring removal of all impediments that affect the efficiency of passenger and freight
road transport today.
In terms of quality, a majority of the road network requires huge investments
for repair, renovation and increase in the number of lines. It is estimated that India’s
logistical cost as a percentage of total production cost is about twice the world average
of 7%. The slow transportation of goods has also affected the movement of goods
among states, delaying exports and imports of the country. The Rakesh Mehta Report
on Infrastructure (1996) estimated the economic losses from bad roads at anywhere
upto Rs. 30,000 crore a year, or around 1 to 2 percent of GDP each year32 . Out of
total national highway length of 70,934 Km, it is estimated that only 14% is four lane
and more with divided carriage way, while 59% are two lane ways and 27% are single
lane ways.33 Immediate capacity augmentation and up gradation with enhanced safety
features is required for taking India on a path of high trajectory growth.
A study conducted by Asian Development Bank brings out that limited or
lack of competition has resulted in inefficiencies in transport services, absence of
commercial management of operations, and underinvestment in transport infrastructure
in many Central Asian Countries.34 This holds true in case of India also.
It has been underlined that economic development has become less
dependent on relations with the resources and more dependent on relations across
space. The business benefits from improvements in transport both in commodity as
well as labour market; in the former, as it will improve efficiency of the firms which will
get access to raw materials and in the latter in terms of improvement in the access to
labour. With efficient road transport, the potential market for a given product increases
32. India Infrastructure Report, 1996.
33. Ministry of Road Transport and Highways.
34. Transport Sector in Central Asia, http://www.adb.org/Documents/Reports/ca-trade-policy/
chap5.pdf accessed on 12.06.2010.

and so does competition. A wide range of products becomes available to consumers
through competition which tends to reduce costs and promote quality and innovation35 .
Effective transport system is expected to contribute a great deal to the
successful implementation of a country’s socio-economic policies and also to the
lowering of domestic production costs through timely delivery and enhancement of
the economies of scale in the production process. Increased competition in the sector
along with removal of all barriers shall lead to desirable results.
While CCI would look into competition issues and investigate all kinds of
anti-competitive behaviour, policies need to be framed and reviewed by different
agencies involved, measures are required to be taken to generate competition and
remove existing bottlenecks both in intra as well as inter modal transport operations.
This would not only lead to provision of secure transport, availability of wider choice
and lower prices to the common man, but also help India achieve a much needed
sustained double digit growth in the coming decade.
****
Automobiles are not ferocious.... it is man who is to be feared.
35. ibid.
- Robbins B. Stoeckel
The civilized man has built a coach,
but has lost the use of his feet.
- Ralph Waldo Emerson

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